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For the next 2 years, a lease is estimated to have an operating net cash inflow of $7,500 per annum, before adjusting for $5,000 per annum tax basis lease amortization, and a 40% tax rate. The present value of an ordinary annuity of $1 per year at 10% for 2 years is $1.74. What is the lease's after-tax present value using a 10% discount factor?
Suggested Answer: C
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Choice 'c' is correct. Return on investment equals net income divided by average invested capital:
Choices 'a', 'b', and 'd' are incorrect, per the above calculation.
36 comments · newest first
NA
Nan
10 months ago
Totally agree, the tax basis amortization is key here!
KA
Kayleigh
11 months ago
Wait, how does that $1.74 factor in? Seems off.
ED
Edna
11 months ago
After tax, it’s more like $4,350, right?
MI
Mirta
11 months ago
I think the tax impact really changes the numbers.
LA
Lashawn
11 months ago
The cash inflow is $7,500 before tax adjustments.
SH
Shonda
12 months ago
I think the present value factor we need is 1.74, but I'm unsure how to apply it correctly to find the after-tax value.
KR
Krissy
12 months ago
I feel a bit lost on how to handle the amortization part. Does it reduce the cash inflow before tax or after?
BI
Billye
12 months ago
This question seems similar to the practice problems we did on present value calculations. I think I need to adjust for tax first before applying the discount factor.
YU
Yuette
1 year ago
I remember we calculated after-tax cash flows in class, but I'm not sure if I got the tax impact right here.
CA
Carey
1 year ago
This is right up my alley! I love these types of present value problems. I'm confident I can work through this systematically and arrive at the correct answer.
AR
Arleen
1 year ago
Okay, I think I've got this. I just need to calculate the after-tax cash inflows, find the present value of the annuity, and then apply the discount factor. Shouldn't be too bad if I stay focused.
GE
German
1 year ago
Hmm, I'm a bit confused by all the details in this question. I'll need to take it step-by-step to make sure I understand the cash flows and discounting properly.
JA
Javier
1 year ago
This looks like a tricky present value calculation involving a lease and tax considerations. I'll need to carefully break down the information and apply the appropriate formulas.
JU
Justine
1 year ago
This looks like a straightforward security question. I think the key is to identify the security mechanism that can provide centralized security measures across all services.
RO
Rosita
1 year ago
Hmm, I'm not completely sure about this one. I'll have to think it through carefully.
TA
Talia
1 year ago
Hmm, I'm a bit unsure about this one. The question mentions "personal workflows", so I'm not sure if that rules out something like Excel or Teams. I'll need to think carefully about the specific capabilities of each product to determine the best options.
RU
Ruthann
1 year ago
Regarding Windows and IIS, I remember that using an extension like 'F5XForwardedFor' helps fetch the real IP, but I wonder if there are any other setups required.
FR
Freeman
1 year ago
I bet the person who wrote this question has a wicked sense of humor. Reminds me of that time my accountant told me a joke about depreciation.
IR
Irving
1 year ago
C) $9,570
GR
Gracia
1 year ago
B) $4,350
GA
Gary
1 year ago
A) $2,610
OR
Ora
1 year ago
Is it just me, or does this question make you want to take a nap? I need some coffee to get through this.
JO
Johnna
1 year ago
Hmm, I think I need to go through this step-by-step. Gotta love those tax basis adjustments!
DO
Domingo
1 year ago
User 3: After that, we apply the 40% tax rate to get the after-tax cash inflow.
RO
Ronny
1 year ago
User 2: Okay, then we subtract the tax basis lease amortization.
FL
Fletcher
1 year ago
User 1: Let's calculate the operating net cash inflow first.
TU
Tula
1 year ago
Wow, this looks like a tricky one! I better brush up on my net present value calculations.
JE
Jerry
1 year ago
Alica: It's $4,350. Option B.
RE
Reita
1 year ago
Nicolette: So, what's the answer?
TR
Trina
1 year ago
Alica: And finally, use the 10% discount factor to find the after-tax present value.
AL
Alica
1 year ago
Nicolette: After that, we apply the 40% tax rate.
NI
Nicolette
1 year ago
User 2: Agreed. Then we can adjust for the tax basis lease amortization.
KA
Kami
1 year ago
User 1: I think we need to calculate the operating net cash inflow first.
CA
Caprice
1 year ago
I'm not sure, but I think the answer might be C) $9,570.
MI
Mignon
1 year ago
I disagree, I believe the correct answer is D) $11,310.
FR
Franchesca
2 years ago
I think the answer is B) $4,350.